Alexis Lum is building a laneway house in his parents’ backyard for three reasons: It’s more affordable than a two-bedroom apartment; he can rent it out if he decides not to live there; and he can have privacy and independence from his parents, while being close enough for regular family dinners.

“I do love mama’s cooking,” he said, adding that he’s sharing the investment with his brother, Antoine, 31. Lum, 28, is a French secondary school teacher at Southpointe Academy in Tsawwassen.

Lum’s situation is pretty typical: laneway houses have been allowed in Vancouver since 2009, and usually they are built as a way for parents to help their adult children get into the pricey Vancouver housing market.

Lum grew up in the Dunbar house behind which he’s now building the laneway house for about $270,000, and he’s really excited to get the keys.

“I love it. It’s absolutely fantastic — it’s a beautiful, small house,” Lum said of the two-bedroom home in his parents’ backyard.

Michael Lyons, vice-president of marketing for Smallworks, a builder of laneway homes in Vancouver, said that at least half of his customers are building these small houses at the back of their lots for the next generation.

“They can’t afford to buy in the neighbourhood where they grew up. People want to stay close to their family,” he said.

The cost to build a laneway home averages between $250,000 and $270,000; that price includes preconstruction costs of $11,500, excavation and site work of about $30,000 to $35,000 and another $175,000 to $200,000 for the construction, Lyons said.

“By the time the dust has settled, you’re in the $250,000 to $270,000 range.”

For that, you can have a 500-square-foot house with one bedroom and one bathroom, plus a garage, on a regular 33-foot-by-122-foot lot in Vancouver, Lyons said. A 50-foot-by-122-foot lot can accommodate a 750-square-foot house, plus garage, with two bedrooms and two baths. And yes, they can be built on the west side of the city. In fact, 80 per cent of Vancouver properties fit the necessary R1 or R5 zoning, Lyons said.

With the benchmark price for all residential properties in Greater Vancouver sitting at $679,000 and housing affordability a significant problem in the Lower Mainland, a laneway house could be considered a bargain.

You cannot stratify or subdivide to sell the house separately; it rides with the property like a basement suite, Lyons said. However, co-owners can have a contract between them that splits the ownership, based on whatever terms they agree to.

For financing, although the landowner’s name must always be on the documents, some banks, including Vancity, have created mortgages specifically designed for laneway homes. Vancity waives the legal and appraisal fees for these mortgages and gives two per cent cash back to people who bring another mortgage to Vancity for a laneway home, said Colin Lawrence, mortgage development manager at Vancity.

“We made a decision to support laneway homes as a way to make home ownership more affordable and also to build up the city’s rental stock,” Lawrence said.

Lawrence has personally worked on financing about 20 laneway homes and says demand is growing as people are starting to catch on to the idea. He cautioned families to get independent legal advice if their intention is to share ownership, so that everyone is protected.

The next generation can get the financing themselves and pay the mortgage, Lyons said, adding that right now a laneway house adds about $300,000 to the value of a property.

For homeowners looking for rental income, a laneway home would also be a good investment.

The mortgage on $250,000 would cost about $1,200 a month, Lyons said, but laneway homes can rent out for as much as $2,000 a month on the west side, or $1,700 a month on the east side.

“Basement suites are renting out for $1,600 or $1,700 a month for a two bedroom on the west side of Vancouver,” he said. “It’s not surprising that a detached house — where you don’t have to live below someone with their kids running around or playing piano above your head — would rent for more.

“You’ve got lots of light, you’ve got two floors and you’ve got two bathrooms. Of course it’s going to be valuable.”

Additional costs to bear in mind are property taxes, which will add about $25 per month, and insurance which could also tack on about $25 per month.

Lyons said the laneway houses are also freeing up rental suites because often the people who live in a laneway house would otherwise be renting.

“This allows people to live closer to where they work, play and go to school. It also provides more rental units in city that is very short on rental houses,” Lyons said. “People are getting used to seeing these in their neighbourhood. People see them and think, “That would be really good for us.’ ”

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